builder with yellow helmet and working gloves on building site
The United States construction sector is expected to grow at a compounded growth rate of 5% between 2022 to 2026. At the end of 2026, it’s forecasted to reach over $1.6 million.
If you’re planning to start a construction business, you probably are overwhelmed with fear and excitement at the same time. As a savvy businessman, owning a construction firm can open new doors, but the task ahead isn’t easy.
The first step when starting your business is to learn the approaches that can guarantee your success. Compared to other types of business, you’ll have to do due diligence when forming your construction firm.
Are you thinking of starting a construction business? This guide should help you know the steps you can follow to launch your business successfully.
Before starting your business, ensure that you collect important information about the industry. This will give you an idea of the common projects within your area. Still, it will act as a guide on the type of employees and construction equipment to choose.
You can find information about the industry from your local print publications or government websites. When performing your research, ensure that it’s broad-based. This means that it should cover tax implications, construction regulations and other emerging construction trends.
Remember that the local information can help to guide you on where you should start your firm. For instance, if you find that your area has many construction companies if you move to the nearest town or city.
You should know that startup construction companies need a business plan. This is important as it acts as a blueprint on the steps to take while starting your business and ways to raise investment funds. That being the case, your business will be on track to attaining success.
Drafting a business plan isn’t difficult, even if you don’t consider yourself a writing expert. Business plans usually follow a specific outline, which takes out the guesswork from the process. Among the areas your business plan should address is the market analysis.
This should include the needs you plan to fill and areas your market supports the business. It includes aspects like outlining your suitable clients, knowing your competition and defining your business goals. Your plan should also outline your business structure. This will help define whether it’s a sole proprietorship, limited liability or an S Corp.
It should also have a breakdown of your finances, personnel and how you plan to undertake your marketing.
Once you’re done drafting your business plan, the next important step is registering your business. The first step in this process is to have a business name and then list it under a limited liability company or corporation.
Most people prefer the LLC because it offers a straightforward way to pay taxes. Besides, you can even cover your assets if you face legal issues or are in debt. When registering your business, you should obtain an employer identification number.
This is what you’re going to use to identify yourself whenever you’re opening a bank account, hiring employees or paying taxes. You’ll receive your EIN by applying for it via the IRS website. When filing as an S-Corp, you will need to fill out form 2553 with the IRS.
For your business to operate legally, you’ll need to acquire proper credentials. This includes important documentation such as Insurance, certification, and licenses. Here’s a breakdown of licenses and Insurance that you should have.
The regulations on getting a construction license vary across different states. However, there are three main licenses you require to run your company successfully.
In most states, construction companies need to have a general contractor license. Taking such a license proves that your company is competent and trustworthy. Your clients are also assured that you will complete their task successfully.
Some states may need contractors to take specialty contractor licenses. For instance, if you specialize in roofing, electrical or plumbing, you’ll need to take a license for that specific field.
If you are a contractor and want to take part in a government project, you register as a government contractor.
In addition to licenses, you should get insurance coverage in the area you operate. Understand that Insurance may vary across different states. However, some of the most common options you should never overlook is the general liability, worker’s compensation, and unemployment insurance.
It can be very expensive to start a construction company, so it’s crucial to know how you can finance it. You’ll be required to buy supplies, seek equipment rental services and keep your company vehicles running.
Luckily, there are a variety of business construction loans that may be useful when starting your company. Some offer great flexibility, such as a business line of credit. Others like the Small Business Administration (SBA) loans offer a one-off lump sum.
Some loan options don’t have strict credit history requirements, such as equipment financing. This is designed to help startup business owners buy equipment for their business. Remember that this financing is only tied to the purchase of machinery.
starting a construction business involves many things aside from getting the startup capital. It’s also important that you properly register your business at the state and federal levels and formulate a good marketing plan.
Running a successful construction can be expensive, and you should find a funding source. This could either be equipment financing or a one-off loan to start-up enterprises.
You should also know that construction companies work on different projects. You should choose your preferred option based on your interests, expertise and common projects in your local area.
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